Oil production is typically an extraordinarily capital intensive industry. It uses a high amount of skilled labor, very specialized infrastructure and the type of facilities that are required are extremely expensive. This is triply so in the case of Venezuela. The Venezuelan oil patch is one of the most difficult in the world: the crude is low-quality, the deposits are complex, and the sort of infrastructure that is required is just lengthy. Very few of the oil fields are very close to the coast, so you also have an additional disconnect between getting the crude to market that requires even more infrastructure. They have to use a lot of steam injections sometimes just to melt the deposits and a lot of the crude comes up such low quality that they actually have to add higher quality crude to it, mixing it, sort of partially refining it before they even put it into the refineries and then take it to the coast.

Even then most of Venezuela’s crude production is of such low quality that only very specific refineries that have been explicitly modified or built to handle the crude can handle it. One of the great misconceptions in the global oil industry is that oil is oil. There is actually considerable variety between the various crude oil grades and most refineries prefer to get their crude from a single source, year after year after year, and typically there are only a couple dozen sources that might be able to meet their specific needs. Oil is not a fungible commodity and Venezuelan crude is one of the more exceptional grades in terms of just being unique. As such, PDVSA [Petroleos de Venezuela], the state oil company of Venezuela, has had to be a very sophisticated firm in order to manage all of these capital, infrastructure, staffing, technological and economic challenges.

The problem that the Chavez government had in the early years is when you have this large of a nucleus of skilled labor — these are intelligent people who are used to thinking through problems, they have opinions, they have political opinions — PDVSA became the hotbed of opposition to Chavez, culminating ultimately in the coup attempt in April 2002. Chavez, regardless of what you think of his politics, had a very simple choice to make: he could leave these people ensconced in their economic fortress of PDVSA, allowing them to plot against them at will, or he could gut the company of its political activists. He chose the latter option and that has solidified his rule but has come at the cost as a slow degradation of PDVSA’s energy capacity. As a result, ten years on, output is probably at a third below where it was at its peak.

With Chavez in Cuba recovering from surgery, the question naturally is, is he on his death bed, is he about to go out, is there about to be a transition to a different sort of government? From an energy point of view this is all way too preliminary because of the nature of the Venezuelan oil company. Let’s assume for a moment that Chavez dies tomorrow and that the next government is even worse than him: horrible managers that don’t understand the energy industry — a lot of the charges that have been brought against the Chavez government. You’d have no real change for the next six months. There is only so much that you can do differently in the oil industry if you want to keep it operational, and whoever the new government is has a vested interest in keeping the money flowing. So the slow, steady degradation of capacity that we’ve seen for the last 10 years? No reason to expect that that would change at all.

On the flip side, let’s assume for the moment that after Chavez’s death we have a new government that is remarkably pro-American and remarkably pro-energy. Again, for the first six months you’d probably not see much change. The capital investment to operate the Venezuelan industry is so huge that you’d probably need tens of billions of dollars applied simply to handle the deferred maintenance issues that have built up over the last ten years. Ultimately you’re going to be looking at years of efforts and tens of billions of dollars of new capital investment if you’re going to reverse the production decline. That’s something that you shouldn’t expect any meaningful progress in anything less than a two-year time frame.

Suffice it to say, Venezuelan oil is going to be a factor of life in global politics and American politics for the foreseeable future. But because of the sheer scope of the problems that face the Venezuelan oil industry, independently of anything that is related to Chavez’s political needs, the market is up against a problem of inertia. It takes years — honestly, a decade — if you want to make a meaningful change in the way that Venezuela works. The oil patch is just that difficult.

Venezuelan President Hugo Chavez made a surprise return to Caracas early Monday morning just in time for his country’s bicentennial celebrations on Tuesday. Chavez’s medical condition appears to be quite serious and his extended recovery will continue to fuel speculation over the future stability of the regime.

Chavez appeared in his military fatigues on Monday to deliver a speech from the balcony of the Miraflores Palace. This 30-minute speech — along with the 15-minute speech he gave January 30th from Cuba — were pretty uncharacteristic for the usually loquacious and charismatic president. In both speeches, Chavez appeared a lot thinner, a lot weaker. He was reading from a script in both instances. Overall, he appeared to be in pretty bad medical shape, yet does not appear to be in a life-threatening condition by any means.

Chavez has admitted publicly that he has been treated for a cancerous tumor, but that that recovery will take time. Specifically, Chavez said in his speech Monday that “I should not be here very long, and you all know the reasons why.” That was an indication that this recovery is going to take some more time and that that time could be spent in Cuba.

It was very revealing that Chavez was both capable and sufficiently motivated to make an appearance on July 5th for the bicentennial celebrations. This is a highly symbolic event for the head of state and there was a lot riding on Chavez’s appearance, especially as speculation has run rampant on whether the president’s medical condition would cut his political career short. Chavez, of course, wanted to short-circuit a lot of that speculation and remind his allies and adversaries alike that he very much remains in the political picture.

What’s been most revealing about this whole episode is just how little trust Chavez has placed in his inner circle. By design, Chavez is the main pillar of the regime and he’s done an extremely good job of keeping his friends close and his enemies even closer. Close ideological allies like the president’s brother Adan, or Vice-President Elias Jaua, simply don’t have that support within the regime or outside to sustain themselves independent of Chavez. The same goes for military elites like the head of Venezuela’s strategic operational command, Gen. Henry Rangel Silva.

We expect that Chavez will be making some changes to his Cabinet very soon to manage the internal rifts within this regime. This is something I like to refer to as “rats in the bag management.” If you have a bag of rats and you shake them up enough you can prevent any one rat from gnawing their way out of the bag. When Chavez shakes up his Cabinet this time around, we expect him to keep potential rivals like Gen. Silva extremely close, while boosting more trusted allies like Foreign Minister Nicolas Maduro to manage day-to-day affairs.

Based on what we’ve seen so far, we expect that Chavez will be able to manage his regime pretty tightly, even during his medical leave. But given the apparent seriousness of his medical condition, and the potential for relapse in the lead-up to the 2012 presidential election, this also serves as a very good opportunity to identify those regime elites that Chavez has to worry about most in trying to manage the day-to-day affairs of the state most importantly and trying to manage any potential rivals within his inner circle.

A Venezuela update and a healthcare story in one. One might recall that Cuba has the best doctors - or not. Actually I think it is the US that highest the highest survival rate of the afflictions we are most likely to get like prostate cancer. So Hugo is going to Brazil rather that eat his pride.

Hugo Chavez, the Venezuelan president, will travel to Brazil for cancer treatment, a source in the Brazilian government has told Reuters news agency.

The Venezuelan President will come to Brazil's Sirio-Libanes hospital, but no timeline has been set for his arrival, the source said on Thursday.

There was no immediate confirmation from Venezuelan government. Asked if Chavez would go to Brazil for treatment, a high-ranking government official said: "I don't know."

Last week Chavez said he may have to receive chemotherapy.

The Sirio-Libanes hospital is considered one of the best in Latin America and is renowned for its cancer treatment centre.

Paraguayan President Fernando Lugo had cancer treatment there and Brazilian Vice President Jose Alencar was treated there for years before he died earlier this year.

Earlier this month, the Venezuelan leader admitted in a television address that he had a tumour but had undergone a successful operation in Cuba to extract the cancerous cells.

This was his first televised speech to the nation, weeks after he was hospitalised in the Cuban capital, Havana, sparking widespread speculation about his health.

"They confirmed the existence of a tumourous abscess, with the presence of cancerous cells, which required another operation to extract the tumour completely," he had said.

Barely two days after the speech from Cuba, Chavez arrived at Maiquetia airport outside Caracas as the country was preparing to celebrate the 200th anniversary of its independence from Spain.

Addressing his supporters from the balcony of his presidential palace, Chavez vowed to win the battle to regain his health.

He thanked Fidel Castro, the iconic Cuban leader, saying that the veteran leader has been practically his "medical chief" while recovering in Cuba. He said he will "win this battle for life."

Chavez's announcement that he had cancer shocked the country of 29 million people and upended the OPEC nation's politics, which he has dominated for 12 years.

It raised questions about whether Chavez will be able to run for re-election next year.

Last month, Venezuela's government postponed a regional summit, citing President Hugo Chavez's health.

Ever since the 56-year-old leader was rushed into emergency surgery in Cuba on June 10, news about his health has been a matter of great speculation, and even his close aides have little clue about the seriousness of his disease.

Gustavo Coronel is quite knowledgeable about Venezuela having been a government bureaucrat and an employee of government owned enterprises most of his life.

While Gustavo Coronel is one of the "good guys" he still represents socialism in a country that has practically no private enterprise, now even less that when Colonel was in government. The entrepreneurs who wanted to survive under Chavez had to kowtow to him and in effect they cease to be legitimate businessmen becoming part of a government influenced Mafia.

In the best scenario Coronel paints, the new "liberal democratic" government that replaces Chavez quickly loses favor with the population as it is incapable of creating an instant gratification solution not only to the thirteen years of Chavez mismanagement but also to the previous forty years of corruption and populism that led to Chavez in the first place.

The one thing Coronel does not talk about is the emergence of a charismatic leader. Like it or not, if the country is run by faceless bureaucrats and lackluster politicians, chaos is even more likely. Think back to the darkest days of America and Britain. It was forceful leaders who energized the people to supreme effort and to supreme sacrifice. How do you do that with a "give me" culture when you have run out of gifts to give? Since 1958 Venezuelans have been trained not to work for a living but to beg for a living: government handouts everywhere, a.k.a. Socialism - Populism. So far, I have not seen an opposition leader capable of taking charge. The young are lacking in experience and the old -- the old guard ousted by Chavismo -- many of us don't want back in power. Catch-22!

The future looks uncertain, more than usual.

Denny Schlesinger

Gustavo Coronel: Three Scenarios for Venezuela's Future

With President Hugo Chavez already having had two emergency operations for cancer and having had to return to Cuba for chemotherapy, Venezuela expert Gustavo Coronel pontificates on what an ill Chavez means for Venezuela with three possible scenarios for the country's future.

By Gustavo Coronel

For the last five years I have been giving lectures and talks in about 20 cities of the U.S. -- including several think tanks and universities in Washington DC -- and in 10 Latin American countries, about the Venezuelan political and social situation and the impact of the Hugo Chavez regime on hemispheric stability, including U.S. national security. Rather than employing a scenario approach to the political future of the Hugo Chavez regime I have been "predicting" to my audiences that Hugo Chavez will not survive politically beyond his current term, if that much.

My "prediction" has been based on what I see as the significant weakening of Chavez's regime during this period of time, illustrated by the financial chaos experienced by his administration, the increasing collapse of national public services, the lack of food and other essentials in the markets, the intense disarray prevailing in the key state owned companies, PDVSA and CVG, (energy and raw materials sectors), the significant loss of domestic popularity due to reduced direct handouts to the poor, the noticeable internal power struggle within the government's party, the increasing loss of control over his Latin American allies, Correa, Kirchner and Lula/Roussef and the increasingly uncertain Cuban political situation.

Now a new and formidable challenge threatens Chavez: cancer. This health problem, recently detected, certainly could not have been predictable. In the best of cases it would probably render Chavez incapable of conducting the intense political activity he would require to be re-elected.

When all of these ingredients are analyzed, three main political/social scenarios for Venezuela suggest themselves for the short term.

1. Chavez either abandons the presidency in the next few months, or is defeated in December 2012, trying to be re-elected; 2. A military/revolutionary coup d'etat maintains chavismo, with or without Hugo Chavez, in power; 3. Hugo Chavez is "cured" and survives politically in good form, winning the 2012 presidential elections on the strength of his emotional link with much of the people.

Of course, there are many other possible scenarios but they might all be variations on one of the three mentioned above.

In the first scenario (45% probability) the medical condition of Hugo Chavez forces him to abandon his quest for a new term. This probably would mean that the presidential election is brought forward. Or, alternatively, he can run a campaign but would be defeated by the opposition candidate, given his uncertain medical condition and the continued deterioration of the country. A democratic, liberal government would take over and would introduce many policy changes in the country but it would have to face the enormous material and spiritual ruin left by 13 years of Chavez's disastrous regime.

In the second scenario (25% probability), Adan Chavez, the older brother of Hugo Chavez and the military officers connected with drug trafficking and the FARC, stage a successful coup d'etat in order to impose a military-socialist dictatorship in the country. This scenario could materialize in the short term but, most probably, it would not be long lasting due to the backlash generated at home and abroad.

In the third scenario (30% probability), Chavez wins a new term but both his health and the deterioration of the country become progressively worse. In this case his tenure would most probably be short-lived.

Paradoxically, the first scenario, where a democratic government replaces Chavez and he becomes the leader of the opposition would probably be the better one for him in the longer term. The new government would suffer severe loss of popularity due to the harsh economic and social measures they will have to take to put the country back on its feet. Because of this, the people, having a very short memory, would probably vote a relatively "healthy" Chavez back in power in 2017, just as they voted Carlos Andres Perez back into power in the 1990's, trying to recapture the "good old times" when money ran abundantly on the streets of Venezuela, corruption be damned.

Earlier I posted (somewhere) that running Venezuela by now had very little to do with politics or ideology. It now revolves around who controls the drug trade. I think this article proves that I was right on target

The mystery of the “Narco Avioneta” captured in Western VenezuelaAugust 14, 2011

The bizarro world that Venezuela has become allows for everything, there are no longer surprises, least of all if our military is involved. The same military that has been talking openly about staging a coup, should Venezuelans choose a leader different than Chavez in the 2012 elections.

But the military does not seem to answer to anyone anymore in Chavezlandia. The latest bizarre episode already has a leading hashtag in Twitter: #narcoavioneta. You see, a small plane was captured in Falcon state full of drug, some 1,400 kilograms of cocaine was found in it.

Website lapatilla.com has raised numerous (here, here, here) questions about this case, including the fact that it is supposedly not registered in Venezuela, despite having a registration number painted on it and freely and liberally flying around the country.

Now, I don’t know much about the case and its details, whether it was or not registered, where the drug was loaded onto it, whether the two people killed were involved or not.

What I do know, is that according to all reports, the plane took off from the La Carlota airport.

Now, it used to be, up to 2005, that private planes could fly in and out of the La Carlota military base in Caracas. This was stopped in 2005, unless, of course, you were a revolutionary or related to one, or had a connection to one, as I showed in 2006.

So, how could this supposedly unregistered plane, take off from the La Carlota military base, with or without drugs last Friday? Who allowed it? Who approved it? Who was involved?

Oh, I know, it was someone high up in the military, but like Makled and so many other cases, we will never know. No wonder these guys are so nervous that the Government could change in 2013 via the ballot box, who do you think will be fired first and investigated?

The same ones that protect and benefit from the mysterious “Narco Avioneta”. Bet on that!

With Chavez's apparently serious health issues, the growing military and nuclear connections with Iran, and Baraq at the helm here, it looks like Venezuela is going to be appearing on a lot more people's radar screens here in the next year or two; readers of the DB forum will be a step ahead of the curve once again:

To solve the self-created foreign exchange problem, the Chavez government issues dollar denominated bonds that can be purchased with bolivars by the locals. There is a quota per account or per person that banks manage but their favored clients wind up with the bulk of the dollars. The "parallel" (black market) rate has been around Bs.F 8.50 per dollar. When the latest bond issue was announced, it was priced so that buyers would get an effective exchange rate 5.50 or so, below that black market rate but above the official rate. This paralyzed the black market for a couple of week until the bond buyer got theirs. Now that the bond rate is gone, the black market rate is back to Bs.F 8.50 per dollar.

It is "illegal" to even talk about exchange rates but the black market rates are published on the Internet.

(Reuters) - Venezuela's economy is plagued by shortages, high inflation and crippling currency controls, but a massive spending spree by President Hugo Chavez will likely keep an incipient recovery alive, at least until a 2012 vote.

Polls show support for the charismatic leftist leader has edged up since he announced in June he had cancer. But unless he can generate as much sympathy for his economic stewardship, his re-election bid could be at risk.

In the short term, Chavez can paper over underlying problems with subsidies, price controls and ramped-up spending on his flagship health and housing programs for the poor.

But eventually, falling oil production by the OPEC nation combined with mounting debt will make it harder to finance his socialist "revolution," analysts say, leading to sub-par growth and possibly another painful currency devaluation.

"We expect Venezuelan growth to lag behind the rest of Latin America over the coming years," said David Rees, emerging markets economist at Capital Economics in London.

"Of course Chavez, current health concerns aside, will try to pump the economy ahead of next year's presidential election with strong government spending."

Venezuela has the world's largest oil reserves, according to OPEC. Yet it was the last in Latin America to pull out of recession, returning to growth in the fourth quarter of 2010.

The recovery advanced at a healthy clip in the first half of this year and is on track for 4.5 percent annual growth, the U.N.'s regional economic body ECLAC predicts.

High oil prices and public spending are powering the expansion. Since taking office in 1999, Chavez has nationalized large swaths of the economy, scaring off foreign investors and slowing domestic manufacturing, farm and even oil production as companies are reluctant to bet on new projects.

The 57-year-old former soldier's illness has slowed him, but he has made an effort to show he remains in charge, displaying his characteristic flair during regular phone calls to state television programs. He has undergone two chemotherapy sessions in Cuba as Fidel Castro's guest and says he is recovering well.

Oil prices may continue to work in Chavez's favour, rallying since a sharp sell-off last week over the U.S. and European debt crises and fears of another global downturn.

"Even if we see a Lehmann-style sell-off like we saw in 2008 ... as long as oil stays above $70 (42.69 pounds) a barrel, they're in pretty good shape," said Russ Dallen, head of Caracas Capital Markets.

"IT'S BUYING TIME"

Perhaps the biggest wrench in the economy is the mind-boggling set of rules limiting the amount of foreign currency businesses can obtain. The result is a dollar drought that hangs like a curse over a country that imports 90 percent of its needs and where basic items like milk and cooking oil are in short supply.

Annual inflation hit 25.1 percent in July, the highest in the region, but may not constrain growth as long as Chavez' redistribution of oil wealth provides stimulus.

"The main thing that the government needs to do is to maintain adequate levels of aggregate demand, to maintain growth and increase employment. said Mark Weisbrot, co-director of the Washington-based Centre for Economic Policy Research.

"This it can do through spending on public works projects, including housing," he said.

But the system puts huge strains on the bolivar currency, seen as substantially overvalued at the official rate of 4.3 to the dollar and 5.3 for the central bank's SITME rate.

Still, few believe the government will devalue the currency again anytime soon but rather will seek stop-gap measures to increase the dollar supply. It devalued the bolivar twice last year in an attempt to make local businesses more competitive.

"It's buying time, the postponement of tough policy adjustments until the post-electoral period," said Angel Garcia, analyst at local think-tank Econometrica.

It is all a far cry from the oil boom days of the 1970s when the bolivar was one of Latin America's strongest currencies, letting middle-class Venezuelans enjoy foreign travel and cheap shopping at plush Miami malls.

To soften the blow of price hikes and shortages, the government introduced more price controls last month and said it was boosting local production of goods like cement and food.

Dollar-denominated bonds are one way authorities try to supply dollars to businesses, which buy the notes in bolivars before selling them abroad for hard currency. The $4.2 billion sovereign bond issued in July, however, shut out much of the private sector.

The opposition says these are temporary measures that further distort an already dysfunctional economy and look to the 2012 ballot as their best chance of stopping Chavez and luring back investment.

"If there's a regime change in Venezuela, this country is wide open for investment and the turnaround will be incredible. It will be like a Wild West stampede," said Dallen.

By JOSé DE CóRDOBA And EZEQUIEL MINAYA CARACAS—Venezuela plans to transfer billions of dollars in cash reserves from abroad to banks in Russia, China and Brazil and tons of gold from European banks to its central bank vaults, according to documents reviewed Tuesday by The Wall Street Journal.

The planned moves would include transferring $6.3 billion in cash reserves, most of which Venezuela now keeps in banks such as the Bank for International Settlements in Basel, Switzerland, and Barclays Bank in London to unnamed Russian, Chinese and Brazilian banks, one document said.

Venezuela also plans to move 211 tons of gold it keeps abroad and values at $11 billion to the vaults of the Venezuelan Central Bank in Caracas where the government keeps its remaining 154 tons of bullion, the document says.

Venezuelan officials were tight-lipped. Representatives of the ministry of finance and the central bank said there was no official comment, and no one was authorized to address the issue.

Lately, senior Venezuelan officials have criticized Venezuela's dependence on the dollar. Last Saturday, Venezuelan Foreign Minister Nicolas Maduro said the world's financial system, based on the dollar, "had entered into a crisis of uncertainty and we are planning to construct a new international monetary system, and especially in South America, protect ourselves from this situation," he said.

The Bank of England recently received a request from the Venezuelan government about transferring the 99 tons of gold Venezuela holds in the bank back to Venezuela, said a person familiar with the matter. A spokesman from the Bank of England declined to comment whether Venezuela had any gold on deposit at the bank.

A spokesman for the Bank for International Settlements where Venezuela keeps $3.7 billion of its cash reserves, and 11.2 tons of gold, Venezuela values at $544 million, according to the document, also declined to comment.

Analysts said the planned move made little economic or financial sense, since Venezuela would be taking its money out of secure banks in safe countries and putting it in countries that are not as safe and perhaps in currencies such as the Chinese yuan or the Russian ruble, which are not reserve currencies. "It's a big risk," said José Guerra, a former official at Venezuela's central bank. Mr. Guerra said he also had heard about the documents whose authenticity was confirmed to him by Central Bank officials.

Mr. Guerra said one possible reason for the planned moves could be that Venezuela is afraid it could be compelled to pay billions of dollars in compensations to foreign companies that have gone to court to recover damages for companies Venezuelan President Hugo Chávez has nationalized. Another reason could be that China may have asked for collateral for billions of dollars it has loaned Venezuela, Mr. Guerra said.

Venezuela faces a sizable bill from arbitration but it's difficult to pin down a reliable estimate.

"It's a wide range from $10 billion to $40 billion and beyond," says Tamara Herrera, chief economist of Síntesis Financiera, an economic consulting firm based in Caracas. "There are many ongoing negotiations; the major ones of course are with oil companies."

One of the documents outlining the moves appears to have been drafted by Jorge Giordani, Venezuela's planning and finance minister, in conjunction with Nelson Merentes, the central bank president, for Mr. Chávez's approval. It calls for the transfer of the cash and gold reserves as of Aug. 8 in a maximum of two months.

Another document prepared by Foreign Minister Nicolas Maduro for Mr. Chávez's approval calls for Messrs. Giordani and Merentes to prepare a plan to safeguard Venezuela's international reserves given "the recent U.S. debt crisis and its impact on the dollar as a world reserve currency."

The crisis, the document says, "has lit all the alarm signals as to whether it's convenient to maintain our reserves in that currency."

The document also notes that "the powers of the North" have "pillaged" Libya's international reserves as a result of the sanctions applied to Libya. "That makes us reflect on the need to elaborate a plan to monitor and secure the funds that the Republic maintains in international banks to meet its commitments abroad.

For some analysts, the reference to Libya signaled a possible political motive. The charismatic Mr. Chávez, who has said he will run again for president next year's elections, is being treated with chemotherapy for cancer in Cuba. Neither Mr. Chávez's type of cancer nor Mr. Chávez's prognosis has been made public. Moving the reserves may signal that Mr. Chávez and his associates could be preparing some drastic political moves—such as canceling elections—that could incur international condemnation and perhaps trigger sanctions.

"It doesn't augur well for Venezuela," says Roger Noriega, a former high-ranking state department official during the Bush administration.

Opposition congressman Julio Montoya said he received leaked copies of the proposal to move the funds from concerned officials of the finance ministry.

"We don't know if (Chávez) has signed it," Mr. Montoya said during a press conference Tuesday. The congressman from Zulia state criticized what he called the "secretive" nature of the president's deliberation over the measure.

Mr. Montoya said that the proposal raised the question if Venezuela was being pressured into transferring its reserves because of its growing ties with China and Russia.

To fund the country's large-scale social programs, Mr. Chávez has turned to resource-hungry China for assistance on everything from financing to housing and machinery. Last year, Venezuela received a $20 billion credit line from the China Development Bank for housing, which it is paying back with oil shipments.

While China has been Venezuela's largest creditor in recent years, Russia has been a major arms supplier to the South American nation.

Most recently, Venezuela announced it was finalizing agreements for two additional credit lines of $4 billion each with Russia and China, with a portion of the Russian funds earmarked for the Venezuelan military. Venezuelan officials have also said they have recently reached an agreement with Brazil for a $4 billion line of credit.

CARACAS (Reuters) - Venezuela received an enviable honor last month: OPEC said it is sitting on the biggest reserves of crude oil in the world -- even more than Saudi Arabia.

But the Venezuelan oil industry is also sitting atop a well of trouble.

The South American nation has struggled to take advantage of its bonanza of expanding reserves. And a scandal over embezzled pension funds at state oil company PDVSA has renewed concerns about corruption and mismanagement.

Retired workers from the oil behemoth have taken to the streets in protest. Their beef: nearly half a billion dollars of pension fund money was lost after it was invested in what turned out to be a Madoff-style Ponzi scheme run by a U.S. financial advisor who was closely linked to President Hugo Chavez's government.

The fraud case centers on Francisco Illarramendi, a Connecticut hedge fund manager with joint U.S.-Venezuelan citizenship who used to work as a U.S.-based advisor to PDVSA and the Finance Ministry.

Several top executives at PDVSA have been axed since the scandal, which one former director of the company said proved Venezuela under Chavez had become "a moral cesspool."

Pensioners are not the only ones still wondering how such a large chunk of the firm's $2.5 billion pension fund was invested with Illarramendi in the first place.

The question cuts to the heart of the challenges facing PDVSA, one of Latin America's big three oil companies alongside Pemex of Mexico and Brazil's Petrobras.

The Organization of the Petroleum Exporting Countries issued a report last month showing Venezuela surpassed Saudi Arabia as the largest holder of crude oil reserves in 2010.

PDVSA is ranked by Petroleum Intelligence Weekly as the world's fourth largest oil company thanks to its reserves, production, refining and sales capacity, and it has been transformed in recent years into the piggy-bank of Chavez's "21st Century Socialism."

The timing of the scandal is not good for Chavez: the charismatic, 57-year-old former coup leader underwent cancer surgery in Cuba in June and is fighting to recover his health to run for re-election next year. He needs every cent possible from PDVSA for the social projects that fuel his popularity.

MULTI-TASKING

The company does a lot more than pump Venezuela's vast oil reserves. Tapped constantly to replenish government coffers, PDVSA funds projects ranging from health and education to arts and Formula One motor racing. From painting homes to funding medical clinics staffed by Cuban doctors, the restoration of a Caracas shopping boulevard and even a victorious team at the Rio carnival, there's little that PDVSA doesn't do.

Jeffrey Davidow, a former U.S. ambassador to Venezuela who now heads the Institute of the Americas at the University of California, San Diego, points to the occasion when PDVSA senior executives turned down invitations to a regional energy conference at the last minute back in May, saying they were too busy because of PDVSA's leading role in the government's "Gran Mission Vivienda" project. It aims to build two million homes over the next seven years.

"In poorly-managed societies, national oil companies tend to be the most efficient organizations, so the government gives them more work to do, instead of letting them focus on being better oil companies," Davidow told industry executives in the ballroom at a luxurious La Jolla hotel.

That's the kind of criticism that Chavez, who has nationalized most of his country's oil sector since he was elected in 1999, says is rooted in a bankrupt "imperial Yankee" mind-set.

He purged perceived opponents from PDVSA's ranks in response to a crippling strike in 2002-2003 that slashed output, firing thousands of staff and replacing them with loyalists. Since then, the company has endured one controversy after another.

There was the "maleta-gate" affair in 2007, so-called after the Spanish word for suitcase, when a Venezuelan-American businessman was stopped at Buenos Aires airport carrying luggage stuffed with $800,000 in cash that U.S. prosecutors said came from PDVSA and was intended for Cristina Fernandez's presidential campaign in Argentina. Both Fernandez and Chavez denied the charge.

There have also been persistent allegations by industry experts and international energy organizations that Venezuela inflates its production statistics -- which PDVSA denies -- and a string of accidents, including the sinking of a gas exploration rig in the Caribbean last year and a huge fire at a giant oil storage terminal on an island not far away.

In a big blow to its domestic popularity, tens of thousands of tons of meat and milk bought by PDVSA's importer subsidiary, PDVAL, were left festering in shipping containers at the nation's main port last year, exacerbating shortages of staples on shop shelves. Opposition media quickly nicknamed the subsidiary "pudreval" in a play on the Spanish verb "to rot" - "pudrir".

In an apparent damage-limitation exercise after the pension scandal, five members of the PDVSA board were relieved of their duties in May, including the official who ran the pension fund. They were replaced by Chavez loyalists including the country's finance minister and foreign minister.

Gustavo Coronel, a former PDVSA director in the 1970s and later Venezuela's representative to anti-graft watchdog Transparency International, said the fraud had been going on right under the noses of the PDVSA board.

"What this scandal shows is that Venezuela has become a moral cesspool, not only restricted to the public sector but to the private sector as well," he wrote on his blog.

"Money is dancing like a devil in Venezuela, without control, without accountability. Those who are well connected with the regime have thrown the moral compass by the side Venezuelan justice will not move a finger. Fortunately, U.S. justice will."

SHOW ME THE MONEY

U.S. investigators say Illarramendi, the majority owner of the Michael Kenwood Group LLC hedge fund, ran the Ponzi scheme from 2006 until February of this year, using deposits from new investors to repay old ones. He pleaded guilty in March to multiple counts of wire fraud, securities and investment advisor fraud, as well as conspiracy to obstruct justice and defraud the U.S. Securities and Exchange Commission. He could face up to 70 years in prison.

By those outside the circles of power in Venezuela, Illarramendi was seen as one of the "Boli-Bourgeoisie" -- someone who was already wealthy but grew much richer thanks to the "Bolivarian Revolution," named by Chavez after the dashing 19th century South American independence hero Simon Bolivar. In one widely-circulated image, Illarramendi is seen overweight and balding, wearing a dark blue overcoat and clutching a blue briefcase as he left federal court in Bridgeport, Connecticut after pleading guilty.

An ex-Credit Suisse employee and Opus Dei member in his early 40s who lived in the United States for at least the last 10 years but traveled frequently to Venezuela, Illarramendi is on bail with a bond secured on four U.S. properties he owns.

He was close to PDVSA board members and Ministry of Finance officials, but is not thought to have known Chavez personally. The son of a minister in a previous Venezuelan government, Illarramendi did enjoy some perks -- including using a terminal at the capital's Maiquetia International Airport normally reserved for the president and his ministers, according to one source close to his business associates.

His sentencing date has not been set yet, but a receiver's report by the attorney designated to track down the cash is due in September. In June, SEC regulators said they found almost $230 million of the looted money in an offshore fund.

That was just part of the approximately $500 million Illarramendi received, about 90 percent of which was from the PDVSA pension fund, according to the SEC.

PDVSA has assured its former workers they have nothing to worry about, and that the money will be replaced. But what concerns some retirees are allegations the company may have broken its own rules for managing its pension fund, which should have provided for more oversight by pensioners.

A representative of the retirees should attend meetings where the use of the fund is discussed, but no pensioners have been called to attend such a meeting since 2002.

PDVSA's investment in capitalist U.S. markets may seem to be incongruous given the president's anti-West rhetoric, but the scale of such transfers is not known, and the investment options for such funds at home in Venezuela are sharply limited, not least by restrictive currency controls.

Energy Minister Rafael Ramirez told Reuters that Illarramendi only had an advisory role with PDVSA, and that it ended six years ago. So quite how he came to be managing such a big chunk of the pension fund is a hotly debated topic. Ramirez said the pension fund had been administered properly, and that the losses were of great concern to the company.

In July, PDVSA boosted pension payments to ex-employees by 800 bolivars a month, or about $188. The government also allocated nearly half the income from a new 2031 bond issue of $4.2 billion to the company's pension fund -- probably to replenish deposits lost in the scandal.

Still, ex-PDVSA worker Luis Villasmil says his monthly stipend barely meets the essentials for him, his wife, a diabetic son and a niece. One morning in April, he rose early and met several dozen other PDVSA retirees to march in protest to the company's local headquarters in Zulia, the decades-old heartland of Venezuela's oil production.

"I never thought we would be in this situation," the 65-year-old told Reuters with a sigh. "I think PDVSA should show solidarity with the retirees and pay their pensions whatever happens because it is responsible. But that's not the heart of the issue, which is to recover the money if possible."

Ramirez, who once proclaimed that PDVSA was "rojo rojito" (red) from top to bottom, says the firm's 90,000 staff have nothing to worry about. "Of course we are going to support the workers," he told Reuters in March. "We will not let them suffer because of this fraud. We have decided to replace it (the lost money) and to make ourselves part of the lawsuit (against Illarramendi)."

ORINOCO FLOW

The latest scandal comes at a time when observers are focused on the future of PDVSA, given Chavez's uncertain health, next year's election and OPEC's announcement on reserves.

The producer group said in July that Venezuela leapfrogged Saudi Arabia last year to become the world's no.1 reserves holder with 296.5 billion barrels, up from 211.2 billion barrels the year before.

"It has been confirmed. We have 20 percent of the world's oil reserves ... we are a regional power, a world power," Chavez said during one typical recent TV appearance, scribbling lines all over a map to show where planned refineries and pipelines to the coast would be built.

The new reserves were mostly booked in the country's enormous Orinoco extra heavy belt, a remote region of dense forests, extraordinary plant life and rivers teeming with crocodiles and piranhas.

And there lies the rub. Not only is the Orinoco crude thick and tar-like, unlike Saudi oil which is predominantly light and sweet, it is also mostly found in rural areas that have little in the way of even basic infrastructure. It costs much more to produce and upgrade into lighter, more valuable crude.

So hopes now rest on a string of ambitious projects that Venezuela says will revitalize a declining oil sector, eventually adding maybe 2 million barrels per day (bpd) or more of new production to the country's current output of about 3 million bpd, while bringing in some $80 billion in investment.

The projects are mostly joint ventures with foreign partners including U.S. major Chevron, Spain's Repsol, Italy's Eni, Russian state giant Rosneft and China's CNPC, as well as a handful of smaller companies from countries such as Japan, Vietnam and Belarus. Even after the nationalizations of the past, investors clearly want a seat at the Orinoco oil table.

In June, Ramirez announced new funding for Orinoco projects this year of $5.5 billion through agreements with Chinese and Italian banks.

The question remains: will PDVSA have the operational capacity required as the lead company in each project, and will it be able to pay its share?

"Processing that extra heavy crude requires a lot of capital and equipment, and the climate is not good for that at the moment," said one regional energy consultant who has worked with PDVSA and asked not to be named.

There may be billions of barrels in the ground, but the pension scandal will only underline the risks going forward for foreign companies with billions of dollars at stake.

- Press Release, Belize Police Department, Press Office - On Saturday, November 13, 2010 at about 2:00a.m. Independence Police (ISF) received information of an aircraft suspected to have landed somewhere in Bladden Village. As a result, ISF police proceeded to the area where a white van was seen coming through the area.

With the assistance of Belize Special Assignment Group (B-SAG), the van was intercepted at the San Juan Bus Stop. On board the van were the following persons: Renel Grant, a 33 year old Corporal of Police attached to Traffic Branch in Belize City, as driver; Nelson Middleton, a 39 year old Corporal of Police and Driver assigned to the Govenor General who is a resident of Camalote Village; Lawrence Humes, a 38 year old Sergeant of Police presently attach to Belmopan Police Station of #2 Grapefruit Street in Belmopan; Jacinto Roches, a 42 year old Sergeant of Police attached to the Internal Affairs Desk in Belmopan and a resident of #22 Tangerine Street in Belmopan; and Harold Usher a 36 year old Boatman of the Customs Department from Finca Solana in Corozal Town.

All of the van passengers were detained and escorted to the Independence Police Station along with the van. At the station, a thorough search was conducted on the van resulting in the discovery of the following items: Several BDU’s with ADU markings, several wet clothing, 2 car size batteries Atlas brand, muddy jungle boots and tennis, can food, empty sausage cans, a licensed 9mm for Harold Usher. The said van has been processed by Scenes of crimes and Forensic. All items found have been labeled as exhibit.

ASP Alton Alvarez, Officer-in-charge for Independence Police sub formation, along with other police officers left en route to Bladden Village where between miles 56 and 57 they met BDF/B-SAG personnel. At the scene, they secured a white, twin engine, beech craft aircraft 300-FA 137; Black, Red and White in color with number N786B Super King Air 200. The aircraft was processed for finger prints. Also found at the scene was an Atlas brand car battery with 2 pieces of board that had three lights attached on both sides.

Further checks between miles 59 and 60 led to a small white container truck with VIN# JDAMEO8J2RGF75162 that contained twenty three, 17-gallons, plastic containers; three tank with about 500 gallons of aviation fuel and 3 fuel pumps. A total of 12 pine logs were also found in the area.

Searches by the police in the Hicatee Area about 5-10 yards inside some bushes led to the discovery of a GPS Garmin brand, a Iridium Satellite phone, four Hand Held radios, two RAYOVAC Flashlights, a Colt .223 semi-automatic rifle with Sr. No. 007865, a magazine containing five .56 rounds and 2 pairs of camouflage jackets. At around 5:00pm, as a result of further searches in the area conducted by Police, on a road at mile 65 near the Genus Saw Mill at about ¼ mile in led to the discovery of 80 Bails of suspected COCAINE and 17 loose packs of suspected Cocaine. The drugs have since been secured by a police and are being processed by Forensic personnel. (www.police.gov.bz) (pictures by Patrick E. Jones/ PGTV)

On Saturday, media reports in South America linked a major drug bust in Venezuela to Belize. According to the newspaper, La Patilla, a Super King Air was busted with millions of dollars worth of cocaine. Several law enforcement officers were implicated in the bust and two of them were shot during the incident. But that is not where the only coincidence lies with the last year’s largest narco-trafficking bust in the Jewel. The newspaper was claiming that the plane, when its registration was checked on airframes.org, linked to Belize. It claimed that the drug plane was the same one that landed on the Southern Highway in Belize on November tenth, 2010. The website furnished pictures of the Belize incident and also alleged the plane was sold to a company in Florida and consequently resold to owners in Venezuela. But News Five spoke to Belize Defense Force Chief of Staff who refutes the allegation.

Lieutenant Colonel David Jones, B.D.F. Chief of Staff David Jones

“What I can tell you from the time that aircraft was in the drug bust on the Southern Highway. From the time that aircraft was flown into the Philip Goldson and then subsequently held by the Belize Defence Force, we still have that aircraft. That aircraft is currently at our B.D.F. air wing. And it is going to remain there until we get further direction from our government. As far as to the reports, I don’t know where they got their information, but we still have that aircraft—it hasn’t move sicne and it’s not going to move now.”

Jose Sanchez

“What they did was that they linked it through information received from different websites that track VIN numbers and they were saying that the aircraft was exported from Belize to the U.S. and back to Venezuela. So it is not the same aircraft?”

Lieutenant Colonel David Jones

“It must be a different aircraft because we still have the aircraft we captured on the highway. We still have it in custody and it is going to remain there.”

Jose Sanchez

“The minister of police says that the aircraft will in the future belong to the B.D.F. for future use. Will it be part of your air wing?”

Lieutenant Colonel David Jones

“That has been in discussion that possibly it will go to the Belize Defence Force. If it does go to us, then it will be part of our air wing. But that hasn’t been finalized as yet with the government so we are not sure of that yet. But that is the plan if it does happen and of course the B.D.F. would love to have it at the air wing.”

On 24 August 2011 Venezuelan President Hugo Chávez met with Russian Foreign Minister Sergery Lavrov to produce a Plan of Action outlining the two nations’ bilateral cooperation efforts through 2014. Discussions centered on a US$4 billion loan to equip the National Armed Forces and improve Venezuelan defense capabilities, including a modern air-defense system based on Russian technology. Also discussed was the expansion of the joint Venezuelan-Russian bank to finance bilateral socioeconomic development projects with allies as a counterpart to the World Bank.

MARC: Perhaps this sheds some light on recent moves by Chavez to move Venezuelan reserves , , , Note a word from our State Dept or the White House about Russian military sales in the western hemisphere , , , perhaps the fact that we no rely upon Russia to get the majority of our supplies to our troops in Afghanistan has something to do with this?

On 21 August 2011, The Managing Director of the National Iranian Petrochemical Organization Abdolhossein Bayat stated that Iran and Venezuela began construction of a petrochemical complex in Bushehr, Iran, pursuant to an agreement signed in October 2010. The agreement stipulates that Venezuelan oil company PDVSA will be able to participate in the Iranian South Pars natural gas field. The two countries are discussing a similar construction project in Venezuela

What follows are comments about the health of Hugo Chavez. I don't know the qualifications of the writers but the picture they paint sounds plausibe. To look at the pictures, please visit The Devil's Excrement

JMA commented on Hugo Chavez' Physical Evolution part II, July 17th. to August 28th.

Miguel:

It is difficult to ascertain what is going on with the gorilla, because he gives too much contradictory information about his health. I even doubt that he had surgery. If he is really ill, he may be experiencing Hodgkin’s Lymphoma or an early stage of Non-Hodgkin’s Lymphoma. If chemotherapy is needed to treat these tumors, the regimen would include a steroid, which can cause cataracts, e.g.: decreased visual acuity. But, the other drugs in the regime can also cause ocular toxicity. Finally, if he used to wear contact lenses, then he had to stop using them to prevent an infection.

With the info that he has provided, it is very unlikely (if it is true that he has cancer) that he is experiencing any other type of malignancy. Based on what he has said and the treatment he is receiving, the only possible conclusion is that he has an advanced stage cancer.

Having said that, colon or rectal cancer seem pretty off the table. First, the surgery is really hard on the patient. If he had an abscess as he said or a rectal cancer, it would have most certainly required a colostomy. Let me tell you. When this happens to you, your life changes radically. I have seen it first hand in a most beloved family member. You LOSE weight, and I mean lots of it. The cancer’s chemical mediators, its feeding on the patient, and the anorexic effects of chemotherapy make sure that happens. Plus, if the Cubans extracted a tumor the size of a baseball, like he said, well, that is stage IV colon cancer, with metastases to peritoneum (only God can save you from that) and liver, for starters.

Renal cancer does not get treated with chemo. You take the mass out, and then give radiotherapy. They respond very nicely to it.

Bladder CA does not get steroids. Ever. So, you don’t get bloated like a pig.

Prostate CA: there is some blatant ignorant mumbling some words about it in an above comment. Suffice it to say that if you get into a stage in which you need chemo, you are basically dead. The pain from the bone metastases is unbearable almost all the time, and your bone marrow gets infiltrated so you have all kinds of blood disorders (like having leukemia). Pathologic fractures are less likely since these patients are bedridden. So, again, for the ignorant above, no, prostate CA does not produce osteoporosis, it’s osteomalacia with its attendant pathologic fractures if any, and, no, your height is not reduced, because as I said these patients stay in bed because of pain, avoid fractures of the vertebral spine, and thus its height is preserved. I have yet to meet a stage IV prostate cancer patient walking. That would indeed be a miracle.

So, for the reasons above, I will say that if the gorilla has anything it would be a Lymphoma. If it is Hodgkin’s disease, it is very treatable and he is likely to survive. If it is a NHL, his chances are not good, but still he may survive.

Finally, regarding his freaking eyes, a decreased visual acuity could be the result of malignancy, chemotherapy, or radiotherapy.

However, don’t ever underestimate the lengths to which a malignant narcissistic-psychopath would go to reach his goals. I know you don’t have to be versed on this, but let me tell you it is hair-raising knowledge. The books of Dr. Robert Hare come to mind. Read them, and your perception of life in this planet changes completely.

A very good night to all of you guys!

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Roberto N commented on Hugo Chavez' Physical Evolution part II, July 17th. to August 28th.

For what it’s worth, I translated JMA’s comment by Franzel Delgado Senior into English because it was so interesting. Any mistakes in translation are mine.

Franzel Delgado Senior reaffirms that universal statistics demonstrate that the majority of sociopathic personalities, in which president Chavez is classified, come to a tragic end. The psychiatrist believes the president is biologically and irrevocably designed for conflict. “To pretend he will change is to wait for his eyes to change from brown to blue”

“I have no interest in disqualifying anyone. I simply believe that, without the contribution of psychiatry, it will not be possible to understand the complex scenario in which Venezuela has entered.”

The thesis of assasination is recurrent in president Chavez. Is there a psychological explanation for the fact that the president constantly refers to this in his discourse?

The president has, as does every human being, a personality configuration. This process that feeds the construction of the personality ends, on average, at age 21 in all people. After age 21, it is not modifiable. When the personality loads are well distributed, we can speak of a normal personality. But when this process of structuring happens inadequately and ends with unbalanced loads (many loads of one sort and few of others), then the personality configures itself pathologically. And this pathologic configuration is for life.

Is there a pathologic configuration in the case of the Head of State?

There are very clear characteristics that allow, without great difficulty, to pose a personality structure of a sociopathic and narcissistic type. Sociopathic personality disorders are defined in the universal classifications of psychiatry. These are people that are biologically designed to violate norms; they do not exercise loyalty; they do not act with truth; they have affective lives that are very unstable; there is no sensibility in their structures; there are no regrets; they always have to live in conflict; they cannot live in peace with others and are very manipulative.

And the narcissistic personality?

In the case of narcissism, the perception that the person has of him/herself is not real; it is exaggerated; it has the conviction of being unique; he or she is above the rest. Any bad action is possible to satisfy these narcissistic necessities of the personality. Because narcissists believe they are pre-destined for special situations, it is perfectly understandable that they could hold the fear that there are people interested in eliminating them. The fear of the President of that magnicide is absolutely justified. If we examine universal statistics, we find that a very significant proportion of people with sociopathic disorders end up dead. Because they are aggressive, conflictive, violate the rights of others and at some point in their life, someone gets even.

Can you classify the President’s personality even though he has not been your patient?

I cannot diagnose as a physician, because he has never been my patient, but we psychiatrists can aver that the observable behaviors of the President correspond to those types of personality disorders that I mention. Aside form those characteristics, I believe that Chavez is a person with a very basic intellect; a man with little culture; to go to bed Catholic and wake up Evangelical 8 hours later is a great example of this.

But intelligent

He could be intelligent. What happens is that sometimes a person’s intelligence fools you. For too long, international classifications showed that one of the characteristics of sociopathic personalities was intelligence. But, over time, this criterion was revised, because it began to be apparent that it wasn’t so much intelligence, but the ability to manipulate the others that made them appear to be intelligent. To believe that the President will change is to pretend that his brown eyes become blue.

But couldn’t he change even by some feat of genetic engineering?

You cannot act on personality. We cannot expect peace while Chavez is the president of Venezuela. It’s not that Chavez doesn’t want to be different, it’s that he can’t be different. He is designed biologically to do what he does. Not even if he wanted to could he be any different. While we fail to understand this, we will fail to understand why we are declaring war on the US, or why we are buying one hundred thousand rifles form Russia or why he destabilizes life and peace in Latinamerica.

The idea of magnicide is also mentioned recurrently by Fidel Castro, who keeps count the number of times the US has tried to assassinate him.

Chavez and Castro, although intellectually different (the first is the warrior, the second the oracle), must have similar personalities. To be a dictator for over 40 years, Castro must have, without doubt, a sociopathic structure. If there is no sociopathic structure, you cannot be a dictator because to be a dictator is to violate the rights of others, the disrespect of limits; conflictivity; cruelty. And that, a healthy personality cannot gloss over. No person that does not have a narcissistic component, that does not believe they are superior to others, can be dictator. Because, precisely, the dictator looks for power, for submission, to subjugate eternally.

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JMA commented on Hugo Chavez' Physical Evolution part II, July 17th. to August 28th.

And, that is the point my dear friend: don’t ever underestimate what this guy would be capable to do. He would burn the whole country if he thought that was what was needed. But, don’t just take it from me, because I am not a psychiatrist. Here I will present you with some pearls from Dr. Franzel Delgado Senior, one of the best psychiatrists in Venezuela (My apologies for our non-Spanish speaking friends):

The Venezuelan government has announced four key policy moves designed to enhance the country’s economic security. The first is the transfer of $6.3 billion in currency reserves to banks in Russia, China and Brazil. In the second move, Venezuela announced that it would transfer $11 billion worth of gold, mostly held abroad in Swiss banks, back home to the Venezuelan Central Bank. Third, was the nationalization of Venezuela’s gold sector, and fourth, was the creation of joint ventures between Venezuelan state firm PDVSA [Petroleos de Venezuela] and state mining firms.

The Venezuelan Central Bank lists its currency reserves at $6.5 billion and its gold reserves at $18 billion. A whopping 60 percent of Venezuela’s reserves are thus distributed in gold, while the rest are distributed in bonds and cash. Many in the investor world have written off these moves as irrational moves by Chavez’s economic team that will only enhance investors’ skittishness in Venezuela. In our view, the moves make good political sense for the Chavez regime but are also extremely revealing of the government’s growing vulnerabilities.

We pointed out at the beginning of the year that the rising level of economic decay, runaway corruption and growing political uncertainty in Venezuela would make the Venezuelan regime more reliant on its allies, particularly China and Russia. But both Russia and China have become increasingly skittish over the rising level of political uncertainty in Venezuela. Both of these countries have deep insight into the state of PDVSA’s financial disarray, and they both can see very clearly that there is no clear successor to Chavez who would be able to manage the regime as tightly as he has. For that reason, every time Venezuelan delegations go to Beijing and Moscow asking for larger installments on these loans, the Chinese and the Russians are coming back asking for greater collateral. And this likely explains Venezuela’s decision to transfer its currency reserves to Russian and Chinese banks. This allows Venezuela to draw larger amounts from these loans, but it also gives Russia and China the option, theoretically, to block Venezuelan reserves down the line should they feel the need to insulate themselves against a potential Venezuelan default.

Now, Chavez has had a lot of reasons for trying to insulate his country’s reserves. More recently, Chavez has likely been unnerved by the West’s freezing of assets of his close friend and ally, Moammar Gadhafi. There is also a very active sanctions lobby in Washington D.C. that has been spending a lot of time highlighting the links between PDVSA and IRGC-linked companies in Iran that is putting Venezuela on the sanctions radar. Another likely reason behind this move has to do with pending arbitration disputes on Venezuela’s nationalization decrees. Venezuela has a number of lawsuits now exceeding up to $30 billion with Conoco Phillips, Exxon Mobil, among other major firms.

Now, the Venezuelan move to transfer the majority of its gold assets back home and nationalize the gold sector likely have a lot to do with PDVSA’s increasing cash flow problems. In trying to address this problem of improving PDVSA’s efficiency as well as the efficiency of key mining companies, the Venezuelan government has announced a policy to create joint ventures between PDVSA and mining firms in the country. Theoretically, this type of consolidation could lead to greater efficiency, but if you look at the history of PDVSA’s nationalizations, the company’s expanded portfolio has led to greater inefficiency and not less.

Given the rising political uncertainties of the day especially given that Chavez is his sick with cancer, the Chavez government cannot afford to see its social development projects held back by PDVSA’s cash flow problems. Those projects are crucial to the regime’s political support and with elections slated for 2012 and the potential for those elections to be moved up sooner depending on Chavez’s health, you can see why the government is so eager to have reserves at home, and that is the gold assets back home, so it can draw on its reserves more easily and thus have the cash flow to support these politically crucial development projects. And the Chavez government made the nationalization move at a time when gold prices are at an all-time high. Nationalizing the gold industry allows Venezuela to add more gold to its existing reserves while reducing its exposure to the dollar while relying on local resources. In other words, Venezuela can sell oil abroad in dollars and then transfer its currency reserves to gold, which will now be much more accessible at home. Venezuela can then issue bonds at much lower rates, offering its gold as collateral, thus getting the cash it needs to support these politically crucial social development programs.

Rumor has it that Hugo Chavez is terminally ill with cancer. The rumors are based on published photographs which are then interpreted by people who pose as medical doctors or otherwise experts on the subject. On the web it's hard to know who is who so it has to be taken with a pinch of salt.

The linked blog entry has a recent picture of Chavez with Raul Castro. The blogger, Gustavo Coronel, is a well know and trusted fellow (he's not the one diagnosing Hugo's condition). Chavez certainly looks sick:

Here is a comment by "JMA" who is supposed to be a medical doctor. His web posts sound credible but I don't know the guy from Adam:

Quote

JMA commented...

Up to some point in time, the changes that he underwent were perhaps not sufficient to really believe that he was very sick. But, Jesus! he now looks almost terminally ill.

The fact that worries me is that from this point on anything can happen to him. He could die suddenly from a myriad of acute complications that would be too long to post here, or from a longer protracted course lasting no more than several weeks or a few months. After seeing that photo, I have trouble believing that come December he will still be alive. If my above speculation proves correct, then the origin of his cancer does not matter anymore. I’ll bet his doctors would be now trying to avoid or treat the wide variety of complications caused by metastatic disease.

In light of these considerations, it may very well be possible that shortly the country is plunged into a severe crisis.

All the secrecy is falling away. The guy is not long for this world. I wonder what preparations the opposition has made. They better be prepared to battle the Chavistas. When Carmona and other oppo leaders arrived in Miraflores -- our White House -- in April 2002, they were CLUELESS. They acted so poorly that the military brought back Chavez. This time, when the opportunity comes, I hope they are better prepared to take the day. A military-drug-cartel dictatorship by brother Adan Chavez would be as bad as North Korea and even worse than Cuba.

I believe it’s quite relevant since during this ceremony (mass actually), HCh received last rites from Monsignor Mario Moronta, while not exactly the ones for somebody that will die in the next 15 minutes (there are several within this sacrament), but last rites nevertheless, the type usually given to very sick people. So the NY official and pompous church prayer service was actually not the first one.

Now, Deanna commented towards the beginning of this thread “that some Venezuelan prelates (example Msgr. Mario Moronta)” support Chaves. I have information from a 100% reliable source that Mario Moronta does NOT support HCh, or in other words MM is not a Chavista. He also wrote an essay “Jesus was no socialist…), see: http://tinyurl.com/4yavx49.

They have known each other from before HCh was president and now Monsignor Moronta supports him in the function of a PRIEST which is his duty. And Chavez for some reason trusts him.

As a result of the absolution that goes with the application of this last rites or “Anointing of the Sick” sacrament, it was conditioned to him freeing some of the ill political prisoners, which he reluctantly did.

I would much rather see Hugo Chavez leave power defeated in elections by the Venezuelan people than to die prematurely as a pretend national hero, but I can't say I will be actively praying for his health or recovery. In one of the elections he stole IIRC the polls showed him losing 40-60 and his election apparatus put him winning 60-40. Where I live the margin and theft for Obama's 60th senate vote, Al Franken, was just a few hundred votes. Different facts, same lesson IMO, the margin of victory or loss matters.

Wishing you a peaceful and successful transition to more freedom, less government and better government than these last dozen years. What happens in Venezuela matters throughout the hemisphere and the world.

It is unfortunate that the popularity of this thread is due to the wickedness of our leaders, especially that of Hugo Chavez.

The story these last 12 years could have been how the Venezuelan voters rejected Chavez and moved instead boldly in the direction of individual liberty and private enterprise and transformed a nation of oil wealth, high literacy rates and strategic location into one of the freest and fastest growing economies on the planet. Can't change history but how about from here forward...

To the embarrassment of the Left, it appears that protesters are being paid to protest on Wall Street. The presence of Eva Golinger is particularly notable.

Written by The Commentator on 7 October 2011 at 8am

Over the past several days, anarchists, anti-capitalists, environmentalists, communists, and probably several other varieties of left-wing crackpots have converged in small numbers on New York to protest against Wall Street.

In the United States, these types of protests are common; to an extent, they’re welcome manifestations of democracy. To be sure, not everybody agrees with the messages portrayed on the streets of Manhattan today, but there is general consensus that it is the people’s right to protest peacefully.

But to the embarrassment of the left-wing Twitterati, details have emerged of cash passing hands from labour unions to protesters. That’s right; a protest supposedly organised against the capitalist system is being run on supply and demand.

But it’s not only trade unions funding pinko activists to kick up a stink.

The presence of Eva Golinger should also be noted. Ms. Golinger has said the aim of her group, the Venezuela FOI Info, is 'to save Chavez'. For this amongst other actions she has been referred to as a key Chavez propagandist. According to Golinger’s own twitter feed, she has been actively participating in the operation #OccupyWallStreet (that's Twitter-talk for those unfamiliar) while feeding inaccuracies and untruths back to Venezuelan media – mainly through VTV, Venezuela’s state owned channel.

As an editor of Correo del Orinoco, a Venezuelan state run newspaper, she is an employee of President Chavez.

The irony, however, is not lost on the careful observer. In Venezuela, Ms. Golinger has made a name for herself by leading a virulent, if relatively unsuccessful attack against Venezuelan civil society organizations.

She is on Venezuelan government TV several times a week naming Venezuelan citizens who have dared to advocate for human rights or democracy in their country. Her main scapegoats, it would seem, are the National Endowment for Democracy and the United States Agency for International Development; two U.S. government organisations that provide support to civil society in monitoring Venezuela’s democratic collapse; a collapse in which Ms. Golinger is, of course, actively involved.

Ms. Golinger’s presence in New York is not illegal – although as an employee of the Government of Venezuela, technicalities could emerge regarding the Foreign Agent Registration Act.

Be that as it may, for Ms. Golinger the inconsistencies are risible. Condemning civil society organizations who receive international cooperation in Venezuela – something that is a mainstream, accepted, common practice for NGO’s everywhere – while serving as an employee of the Government of Venezuela and participating in anti-government protests in New York serves to expose the double standard inherent in Caracas.

Thankfully, the world seems to be losing patience with the antics of Chavez and his “revolutionary” employees. And new revelations that Venezuela is, in fact, a narco-state serve to wrest what little legitimacy remained from the Venezuelan government.

Add this to the fact that President Chavez appears to be critically ill, and a power struggle has erupted among his inner circle over succession and it would appear that Ms. Golinger should enjoy her last few moments in the sun.

She may very well find herself shortly unemployed; looking to the US government, who she condemns at every turn, for a welfare check.

Venezuelan President Hugo Chavez met with key administration officials Wednesday to discuss how to run his re-election campaign and manage the country during his recovery from an upcoming surgery. In a public appearance Tuesday and then in a telephone interview with Venezuelan state TV channel VTV, Chavez confirmed that he has a 2-centimeter (approximately 0.8-inch) tumor that will have to be surgically removed no later than this coming weekend. Chavez will undergo the surgery in Havana, Cuba, with the same medical team that removed a cancerous tumor from his body in June.

This confirmation follows months of rumors and leaked reports about Chavez's worsening health. In this week's announcements, Chavez was careful to omit all but the barest details of his illness and of his plan to be absent from politics for several weeks. However, what he did say appears to confirm a January report by Spanish newspaper ABC that claimed a tumor had reappeared in Chavez's abdomen. According to the report, Chavez refused medical recommendations to seek treatment in the wake of his diagnosis. Without the treatment, his doctors had reduced his life expectancy to 9-12 months.

In the short term, the announcement raises questions about the stability of the Chavez regime. Chavez is an integral player in the vast majority of political and technocratic decisions in Venezuela. He also has no clear successor. Although a circle of prominent elites surrounds him, not one of those "Chavistas" has the public legitimacy to be his successor. At this point, the political power struggle that arose when Chavez first announced his illness appears to have settled. In January, Chavez appointed two men who maintain significant support among the military, Diosdado Cabello and Henry Rangel Silva, to be president of the National Assembly and minister of defense, respectively. With this move, it became clear that the more pragmatic and militarily connected -- but not necessarily politically popular -- faction had risen to the fore.

The political mechanics behind the appointments are not entirely clear. Cabello and Rangel Silva are both powerful in their own right but are largely dependent on Chavez's political legitimacy to maintain the regime. Combined with persistent factionalism within the military, this dependence on Chavez makes a coup d'etat unlikely as long as Chavez is alive. Considering that Chavez's life expectancy without treatment is less than a year, his decision to undergo surgery may actually lower the potential for a crisis within the Chavez regime ahead of the Oct. 7 presidential election.

But stability among the Chavistas does not diminish the potential impact that news of a recurrence of cancer could have on Chavez's prospects for re-election. The opposition in Venezuela recently selected Henrique Capriles Radonski to oppose Chavez in the presidential election, and Capriles is counting on the public's uncertainty about Chavez's longevity and the Chavistas' lack of a clear succession plan to inspire voters to support the opposition in October.

With Chavez's earlier claims of being completely cured having been proved incorrect, events seem to be working to Capriles' favor. Chavez must choose whether he can risk holding office for one more term under such uncertain health circumstances or if he should choose a successor. With no one in Chavez's inner circle possessing significant charisma or influence, it's not entirely out of the question that Chavez could accept a transfer of power to Capriles.

After Chávez, the NarcostateThere are powerful men in Venezuela who are far worse than Hugo Chávez. And if Obama keeps "leading from behind" in Latin America, that's who we very well might get.BY ROGER F. NORIEGA | APRIL 11, 2012

Venezuelan leader Hugo Chávez has tried for 10 months to conceal the fact that he is losing his bout with cancer, determined to appear in command of his revolutionary regime and the nation's future. This past Holy Week, however, television cameras captured him pleading for his life before a crucifix in his hometown church, his mother looking on without the slightest glint of hope on her face. Chávez's raw emotion startled his inner circle and led some to question his mental health. As a result, according to my sources inside the presidential palace, Minister of Defense Gen. Henry Rangel Silva has developed a plan to impose martial law if Chávez's deteriorating condition causes any hint of instability.

Pretty dramatic stuff. So why isn't anyone outside Venezuela paying attention? Some cynics in that country still believe Chávez is hyping his illness for political advantage, while his most fervent followers expect him to make a miraculous recovery. The democratic opposition is cautiously preparing for a competitive presidential election set for Oct. 7 -- against Chávez or a substitute. And policymakers in Washington and most regional capitals are slumbering on the sidelines.

In my estimation, the approaching death of the Venezuelan caudillo could put the country on the path toward a political and social meltdown. The military cadre installed by Chávez in January already is behaving like a de facto regime determined to hold onto power at all costs. And Havana, Tehran, Moscow, and Beijing are moving to protect their interests. If U.S. President Barack Obama were to show some energetic engagement as Chávez fades, he could begin to put the brakes on Venezuela's slide, reverse Chávismo's destructive agenda, and reclaim a role for the United States in its own neighborhood. But if he fails to act, there will be hell to pay.

Sources close to Chávez's medical team tell me that for months, his doctors have been doing little more than treating symptoms, trying to stabilize their workaholic patient long enough to administer last-ditch chemo and radiation therapies. In that moment of Chávez's very public prayer for a miracle, he set aside his obsession with routing his opposition or engineering a succession of power to hardline loyalists. Perhaps he knows that his lieutenants and foreign allies are behaving as if he were already dead -- consolidating power, fashioning a "revolutionary junta," and plotting repressive measures.

One of them is longtime Chávista operator and military man Diosdado Cabello, who was installed by Chávez to lead the ruling party as well as the National Assembly in January. Cabello's appointment was meant to reassure a powerful cadre of narcomilitares -- Gen. Rangel Silva, Army Gen. Cliver Alcalá, retired intelligence chief Gen. Hugo Carvajal, and half a dozen other senior officers who have been branded drug "kingpins" by the U.S. government. These ruthless men will never surrender power and the impunity that goes with it -- and they have no illusions that elections will confer "legitimacy" on a Venezuelan narco-state, relying instead on billions of dollars in ill-gotten gain and tens of thousands of soldiers under their command.

Chavismo's civilian leadership -- including Foreign Minister Nicolás Maduro, Vice President Elías Jaua, and the president's brother, Adán Chávez, the governor of the Chávez family's home state of Barinas -- are eager to vindicate their movement's ideological agenda at the polls this fall. Maduro is extraordinarily loyal to the president, and is considered by Venezuelan political observers as the most viable substitute on the ballot. Above all, these men crave political power and will jockey to make themselves indispensable to the military leaders who are calling the shots today. - More at the link...

From memory, the Cuban DGI has had "former" officers working for various drug cartels since at least the 80's and Castro sold access rights to drug smugglers to cross Cuban waters/airspace enroute to Estados Unidos. After the Soviets fell, China bought their massive listening post located in Cuba.

IIRC the Chinese bought a company located at the mouth of the Panama Canal (the implication being a listening post) when Carter gave it back to the Panamanians too, but what I am trying to remember was reported in the last few weeks.

Morris also claims that the US is the only market for Venezuelan oil. I don't think this is true. For example, "[Chavez] provides oil at a preferential price to many countries in the Caribbean through the Petrocaribe initiative" (http://www.cfr.org/economics/venezuelas-oil-based-economy/p12089). Morris is right that Venezuela's oil is heavy, "[a]s a result, much of Venezuela’s oil production must go to specialized domestic and international refineries" (http://www.eia.gov/cabs/venezuela/oil.html). In fact, according to Wikipedia (for whatever that is worth, "n 2005, PDVSA opened its first office in China, and announced plans to nearly triple its fleet of oil tankers in that region. Chávez has long stated that he would like to sell more Venezuelan oil to China so his country can become more independent of the United States. The United States currently accounts for 65 percent of Venezuela's exports." So, not only is it NOT true that only the US buys the oil, if the US stopped buying the oil, it might strengthen the ties between Chavez and China. That seems counterproductive.

I readily grant that DM feels unrestrained to staying within his areas of competence and often hyperventilates, and acknowledge the possibility that moving his book sales can play a role.

That said, given the quite active Iranian missile development program and its trajectory of rapidly increasing range capabilities, I put little weight on the fact that currently the capabilities are a couple of hundred miles short-- its not like we are getting to inspect what is there and keep it limited to stuff than can't reach us!.

But the missles he is talking about are the ones that fly short. It imight become a problem in future missle purchases, but as of now it isn't. He is also wrong about the oil purchases and refining capacities, and seems to ignore the role of China with Venezuela and growing in the region.

It should also be pointed out that he is shilling his book, in which he makes this false arguments.

The Post’s ViewFacing election, Hugo Chávez ruthlessly consolidates his power

By Editorial Board, Published: July 26 Washington Post

Having the caudillo at the top of the ticket makes a big difference: While most polls show Mr. Chávez leading opposition candidate Henrique Capriles Radonski, they also indicate that the opposition would trounce any of Mr. Chávez’s potential successors. The president’s personal popularity lingers with some Venezuelans, who do not fault him for the soaring inflation, power and food shortages and world-beating murder rate that have emerged during his 13 years in office.

Mr. Chávez, however, is leaving little to chance. He is pouring tens of billions of dollars, much of it borrowed from China, into the economy, producing a preelection boomlet. More significantly, he is employing all the leverage of a legal system and mass media that he has politicized and subordinated to his personal control. Just how far that process of corruption has advanced is illuminated in a report by Human Rights Watch, which concludes that “the accumulation of power in the executive, the removal of institutional safeguards, and the erosion of human rights guarantees have given the Chávez government free rein to intimidate, censor and prosecute Venezuelans who criticize the president or thwart his political agenda.”

Tonight, Chavez nationwide address was interrupted when Guayana workers broke into the stage and started protesting. Chavez tried to go into the Hornest Nest, but it did not work well. Guayana workers are tired of promises. Is this a turning point in the campaign?

And this was the preamble to the protest: Mr. President, we haven’t had a collective contract for three years. And one more thing…!

In Venezuela we don't need terrorists to blow up things, we have our government that does it just as well. The lack of maintenance in many government run operations has been throughly documented over the years. Just a week ago a bridge on the main highway east of Caracas broke in two:

Not too long ago it was the electric infrastructure falling to pieces. There have been plenty warnings about the lack of maintenance and dire predictions of the consequences but they have fallen on deaf ears until the inevitable accident occurs. Then denial and crisis management kick in.

I just hope this is a wake-up call for our voters. We need to kick Chavez out come October 7th.

Another 48 people were injured by the blast, which originated in a gas leak and caused damage both within the facility and to nearby houses, the local governor said.

Based in the west of the South American OPEC nation, Amuay is part of the Paraguana Refining Center, one of the biggest refinery complexes in the world with an overall capacity of 955,000 bpd.

"There was a gas leak," Energy Minister Rafael Ramirez told state TV. "A cloud of gas exploded ... it was a significant explosion, there are appreciable damages to infrastructure and houses opposite the refinery."

Emergency workers were at the scene, where smoke and flames could be seen over the facility.

Local Falcon state governor Stella Lugo said the situation was, however, under control several hours after the explosion at about 1 a.m. local time.

"There's no risk of another explosion," she told state TV. "Right now, we're attending to the injured."

Amuay is operated by state-owned PDVSA which has struggled with repeated refinery problems in recent years, affecting its production figures and ability to fulfil ambitious expansion plans.

Power faults, accidents and planned stoppages for maintenance have hit deliveries from South America's biggest oil exporter.

Ivan Freites, a union leader at PDVSA, said foam was being used to control the fire.

Crafty Dog, if one were to pay attention continually to politics one would lose one's mined! My interest remains constant but my attention to detail (and reporting) waxes and wanes as events unfold, specially events that can change the direction of the country like a election.

BTW, the refinery explosion toll had risen to 24 dead and 80 wounded by noon yesterday.

Energy Minister Rafael Ramirez told Reuters no production units at the Amuay refinery were affected and that there were no plans to halt exports, a sign that the incident will likely have little impact on fuel prices.

Photographs taken shortly after the pre-dawn blast showed wrecked vehicles, flattened fences and giant storage tanks buckling and crumpling as flames lit the night sky. A National Guard building in the area was shattered and officials said a 10-year-old child was among the dead.

A gas leak caused the explosion and most of those killed were National Guard troops who were providing security for the 645,000 barrel-per-day (bpd) facility, Ramirez said, adding that the fire was under control.

"There was a National Guard barracks near the explosion. ... The installation was too close to the operations," Ramirez told Reuters in an exclusive telephone interview, adding that production could resume at Amuay within two days at most.

"We need to boost production at other refineries and look for floating storage near the complex," he said.

The incident follows repeated accidents and outages during the last decade across installations run by state oil company PDVSA that have limited output and crimped expansion plans.

Amuay has partially shut operations at least twice this year due to a small fire and the failure of a cooling unit.

Those problems have spurred accusations of inept management by the government of President Hugo Chavez, who is running for re-election on October 7.

Acrimony over the explosion could spill over into an already bitter campaign, but s unlikely to overtake larger political concerns such as crime and the economy.

"I want to convey the deepest pain that I've felt in my heart and soul since I started to get information about this tragedy," Chavez said in phone call to state TV. He declared three days of mourning.

FIRE UNDER CONTROL

Venezuela has traditionally been a big supplier of fuel to the United States and the Caribbean, but refinery shutdowns have become so common that they rarely affect market prices.

Traders told Reuters the docks at the refinery were shut, and tankers were anchored offshore waiting. They said this would cause delays to some of the country's exports.

The explosion broke windows at homes in the area, a peninsula in the Caribbean sea in western Venezuela, as well as at Amuay's main administrative building.

The blast was also felt out at sea in the Paraguana bay, where some crew members on moored tankers were knocked off their feet by the shockwave, one shipping source said.

Ramirez said the fire that started after the explosion had only affected nine storage tanks holding mostly crude oil and some processed fuels including naphtha.

Officials said two tanks were still burning off residual fuel, and a Reuters witness at the scene said large black clouds of smoke still hung above the area.

Ramirez said existing fuel stocks around the country were sufficient to guarantee 10 days of exports and local sales. PDVSA has no plans to invoke force majeure, he said, which lets companies stop shipments due to accidents or extreme weather.

Amuay, together with a neighbouring facility, forms part of the Paraguana Refining Center, the second-biggest refinery complex in the world, with an overall capacity of 955,000 bpd.

In 2010, there was a massive fire at a PDVSA fuel terminal on the Caribbean island of Bonaire, then a blaze at a dock at the Paraguana complex that halted shipping for four days.

Also in 2010, a natural gas exploration rig, the Aban Pearl, sank in the Caribbean. All 95 workers were rescued safely.

Supporters of Venezuelan President Hugo Chavez fought with supporters of opposition candidate Miranda state Gov. Henrique Capriles Radonski on Sept. 12 in the biggest instance of political violence so far in Venezuela's presidential campaign. Voters will go to the polls Oct. 7 to determine whether Chavez will serve a fourth consecutive term as president. Over the course of the next three weeks, more violent political clashes can be expected throughout the country.

Analysis

It is unclear how the Sept. 12 clashes started, but the altercation occurred after an advance team from the Capriles campaign arrived at the airport in Puerto Cabello, Carabobo state, about 122 kilometers (75 miles) west of Caracas. Dozens of Chavez and Capriles supporters threw rocks at one another, several vehicles were reportedly set on fire, and more than a dozen people sustained minor injuries.

.

The campaigns have traded accusations about whose supporters instigated the incident. United Socialist Party of Venezuela members have accused the Capriles campaign of starting the clash. Puerto Cabello Mayor Rafael Lacava said Capriles collaborated with Carabobo state Gov. Henrique Salas Feo to hire mercenaries to generate anxiety in the crowd, thus bringing about the clashes. Capriles' supporters have made similar accusations against the Chavez campaign. Tomas Guanipa, the head of Capriles' Justice First party, claims to have a document generated by the Chavez campaign directing party members to incite "hatred and violence." During an earlier incident on Sept. 2 in western Venezuela, opposition politician Vicente Bello from the New Era party, which is supporting Capriles in the election, claimed that Chavez supporters shot into a crowd of opposition supporters during a voting drill, injuring four.

These developments have created an atmosphere of tension and likely presage more violent incidents at political events throughout the country. Even before the recent clashes, Venezuela had been experiencing increased volatility. Throughout early 2012, the government's internal stability was threatened by Chavez's illness. While Chavez appears well enough to stand for election, questions about his health remain. During the campaign, Chavez and members of his administration have said they believe civil war will erupt if the opposition wins the election. While this is obviously intended to scare voters away from voting for the opposition, it could also be a warning to Chavez's fractious inner circle, which the Venezuelan president has taken several measures to keep under his control.

In 2007, Chavez announced the creation of Bolivarian militias that would report to Chavez and whose mission was to support the ideological goals of the administration. These and other pro-Chavez armed groups exist today and serve as an insurance policy of sorts for the Chavez administration. By forming an armed force that can instigate chaos in the event of a coup, Chavez made any attempt to depose him directly or destabilize his government more risky. The existence of these armed groups, the plethora of small arms trafficking in South America and the extreme political polarization in Venezuela all lend credence to Chavez's warnings of conflict, if not outright civil war, in the event of an opposition victory. But the militias also serve as a bulwark against any elements within the military or political elite who see a future for Venezuela that does not include an ailing Chavez.

The main purpose of the increasingly forceful rhetoric is to generate enthusiasm for the election. While polls are inconsistent and unreliable in Venezuela, there are some indications that Capriles may be gaining against the still quite popular Chavez. Possibly as a result of these perceived advances, the Chavez campaign is being extremely aggressive. Throughout Venezuela, loudspeakers on main streets have been playing Chavez speeches and issuing calls to support the government, adding to the sense of uncertainty and tension surrounding the upcoming elections.

The occasional violent confrontation is not unusual for political events in Venezuela, and clashes can be expected in Venezuela in the remaining three weeks before the elections. After 13 years in power, the stakes are high for Chavez and his inner circle. Chavez's election in 1999 unseated Venezuela's previous political elite. In the time since, Chavez and his associates have become the new political elite, and they can be expected to take assertive measures to retain that status.

A Day In The Life Of The Venezuelan Opposition CandidateSeptember 12, 2012

Most days, the Capriles campaign tries not to pre-announce where they are going, in order to avoid Chavista thugs from trying to boycott the opposition campaign. This can not be done when he is going to a large city, where preparations are more complex, particularly in terms of security. A couple of weeks ago, Chavistas closed the Ciudad Bolivar airport to stop him from holding a rally that took place anyway. Today, it was Puerto Cabello´s turn.From the early hours of the morning Chavista bands were blocking the roads and the airport, some arriving in Government owned vehicles. This is a picture of the main road to Puerto Cabello from the airport:

Is not a great picture, but you can see the red shirts blocking the road. this was not accidental, one of the Chavista organizers had tweeted it early in the morning:

“Today at 7 AM, in front of the Bartolome Salom airport the working people of Puerto Cabello say “no” to the fascist who sucks up to the Empire” said @denniscandanga, shown on the right pane as he participated in the violent actions of the day today.And here is the picture of the airport:

where you can see how violent they got, and there is more in the following picture, where you see some action by the pro-Chavez thugs in the highway leading to the airport:

Of course, it was the property of the Capriles campaign that was damaged. This is what was left of the sound truck:

This is the truck that suffered less damage, the other one was not so lucky:

shown burning in the above picture and then later after it had been incinerated:

But it did not matter, candidate Capriles pressed on, arriving in Puerto Cabello by boat:

And holding the planned rally, which I am sure was much larger than expected as news of the aggression spread around Puerto Cabello (Although a third day of blackouts I am sure helped):

Of course, as Daniel reports, after the events, Government media said the injured were Chavistas and the aggressors were the opposition in the upside down world of Chavismo.

But Capriles did not let himself be intimidated, he pressed on and had a very successful day.

Just a day in the life of the opposition candidate in Venezuela.(Who is the fascist here?)

Lightning supposedly set ablaze two storage tanks in the El Palito refinery, the old Mobil Oil refinery. Mercifully no one was hurt.

That part of Venezuela has the most awesome electrical storms I have ever seen, the night lights up almost like day but with an erie blue amid terrifying crashes of thunder. But a properly protected installation should not fall victim to lightning and it hadn't for decades. I can only assume that it is part of the lack of maintenance on the part of our national oil company, PDVSA.

Crews extinguish fire at Venezuela's El Palito refinery

CARACAS (Reuters) - Firefighters extinguished a blaze in a fuel storage tank at Venezuela's El Palito refinery, state oil company PDVSA said on Saturday.

The fire was started by a lightning bolt during a storm Wednesday night, but the 146,000 barrel-per-day (bpd) El Palito facility continued operating. Two tanks were initially set alight, but the fire in one was put out within hours.

In a statement, PDVSA said the blaze in the second storage tank was completely extinguished late on Friday.

No one was hurt in Wednesday night's lightning strike.

The second refinery accident in a month has increased concerns about state oil company PDVSA's safety record and practices ahead of an October 7 presidential election.

In August, PDVSA halted almost all output at the country's biggest refinery, Amuay, for six days after a gas leak caused an explosion that killed 42 people.

PDVSA has suffered a string of accidents, outages and unplanned stoppages for maintenance across its refinery network in recent years, hurting the OPEC nation's vital fuel exports.

I don't know how Chavez could lose if he still controls the counting of votes, but let us hope...

He does and he doesn't. Each polling place is divided into "tables" depending on the number of voters assigned to the place. To vote you first check in then you vote on a voting machine which is connected to the CNE (Consejo Nacional Electoral) which is in charge of elections. That does give the government an advantage in that they can monitor the progress of the vote in real time. But the electronic results are not the official results. After you vote, the machine gives you a ticket with your choices printed on it. You deposit this ballot in a box. The vote is then manually counted at each table. Since there are members of most parties as witnesses at most tables, the opposition can easily tally the vote by sending the results by cell phone to the opposition headquarters. There are likely to be differences but they cannot be extreme. The opposition does need a resounding victory because if it is "too close to call" we'll lose.

The most recent trustworthy poll had Capriles wining by 3%. Pundits are hedging which is probably a good thing. Here is the latest:

Win or lose, Capriles may win in Venezuela

By Andres Oppenheimer

Anything is possible in Venezuela’s elections Sunday, but there is a good chance that opposition candidate Henrique Capriles Radonski will do better than any of his predecessors in the polls, and that — win or lose — he will put President Hugo Chavez’s 14-year-old regime against the ropes.

There is a plausible scenario that even if Capriles loses by a narrow margin, a good showing in Sunday’s election will allow him to keep the opposition unified, and to become a viable alternative to a president who may have terminal cancer, and who has no successor who could beat Capriles.

Under Venezuela’s constitution, if the president dies within the first four years of his term, new elections must be held within 30 days. If Capriles emerged as a strong opposition leader from this election, he would have a good chance of becoming the next president before Chavez’s term expires.

Many analysts see change in the air. In a Sept. 26 report entitled “Now or in a little while,” Barclays bank told its clients that “even in the event of a Chavez victory, we think that given the signs of his weak health conditions, if not now, political change could come in just a little while.”

While Chavez looks better than a few months ago and says that he is free from cancer, there are serious doubts that he has fully recovered. There are some reasons to believe that he now looks better not because he is cured from cancer, but because he has interrupted his treatment.

A study of Chavez’s daily public appearances by ODH, a Venezuelan consulting firm, shows that the president’s average daily television appearances during the first three weeks of September were significantly shorter than during the same period in August, and also shorter than his public appearances during the same period before the 2006 elections.

That would be hard to explain unless Chavez is ill: It doesn’t make sense for him to reduce his public appearances in the final stretch of the campaign. And it doesn’t make sense for him to have campaigned much harder in 2006 — when he enjoyed a huge lead in the polls — than nowadays.

As for Sunday’s vote, Chavez enjoys a clear advantage thanks to a combination of slanted electoral rules, intimidation of opposition voters, massive use of government petrodollars and a virtual control of television time.

As Capriles told me in a recent interview, “this is a fight of David versus Goliath, where I’m running against all of the state’s resources” and “against a government that controls all the institutions, and plays dirty.” Still, Venezuelans are suffering from Latin America’s highest inflation levels, record crime rates, food shortages and power outages, and are eager for change, he said.

Several polls give Chavez a 10-point lead, although a recent poll by the respected Consultores 21 and others show Capriles winning by a 3 percent margin.

But most pollsters agree that they have never seen the Venezuelan opposition as energized as today. While in the 2006 presidential elections Chavez won 63 percent of the vote and opposition leader Manuel Rosales got 37 percent, most expect a much closer result on Sunday.

Barring a Capriles upset victory — much like happened in Chile in 1989 or in Nicaragua in 1990, where the opposition won despite facing equally unfair election conditions — he is likely to get closer to 50 percent of the vote. If he gets close to that, he will be seen by many as a president-in-waiting.

Skeptics say the “Capriles now-or-a-little-later” scenario is too optimistic, because Capriles has generated so much enthusiasm among his followers that a defeat on Sunday would demoralize them, paralyze the opposition and perhaps even divide it. Millions of anti-Chavez Venezuelans would conclude there was fraud, and that there is no hope for democratic change, the argument goes.

My opinion: I’m somewhat more optimistic. If Capriles gets close to 50 percent of the vote, he will play his cards well, and will not allow his political momentum to evaporate.

He is not likely to cry fraud if he loses by a margin that he can’t dispute, because doing so would encourage a widespread perception within the anti-Chavez movement that Venezuela’s elections are rigged, and that would lead many to stay at home for the December 16 governors’ elections, and for the April 2013 mayoral elections.

The odds are against Capriles, but he has better chances than any previous opposition leader to succeed Chavez. Win or lose on Sunday, he could still win in the end.

Presidential elections in Venezuela will be held this Sunday, October 7. While the electoral campaign to date has been generally peaceful, incidents of violence have occurred. Demonstrations by supporters of the two main candidates may occur in coming days, particularly in the vicinity of polling centers and traditional gathering points. In addition to previous guidance provided to U.S. citizens, we offer the following recommendations for Sunday October 7, and prudentially, for Monday, October 8:

Minimize being out in public.Keep cellular telephones charged.Where possible, avoid polling stations and other large public gatherings.

We wish to remind U.S. citizens that even demonstrations intended to be peaceful can turn confrontational and possibly escalate into violence. American citizens are therefore urged to avoid the areas of demonstrations if possible, and to exercise caution if within the vicinity of any demonstrations. Since the timing and routes of marches and demonstrations are always subject to change, American citizens should monitor local media sources and the Embassy’s website, through the American Citizens’ “Demonstrations” link, for new developments.

Please review your emails for subsequent updates on the situation during the next few days.For the latest security information, U.S. citizens traveling abroad should regularly monitor the Department's Internet web site at http://travel.state.gov where the current Worldwide Caution Public Announcement, Travel Warnings and Public Announcements can be found. Up to date information on security can also be obtained by calling 1-888-407-4747 toll free in the United States, or, for callers outside the United States and Canada, a regular toll line at 1-202-501-4444. These numbers are available from 8:00 a.m. to 8:00 p.m. Eastern Time, Monday through Friday (except U.S. federal holidays). To receive the latest security information American citizens traveling or residing overseas are encouraged to enroll in the State Department's Smart Traveler Enrollment Program (STEP) at https://travelregistration.state.gov.

The U.S. Embassy in Caracas is located on Calle F con Calle Suapure, Lomas de Valle Arriba. The telephone number during business hours (8:00 a.m. to 5:00 p.m.) is (011) 58-212-975-6411. For after-hours emergencies use (011) 58-212-907-8400. The fax is (011) 58-212-907-8199. Please check the Embassy website for additional information at http://caracas.usembassy.gov.

Venezuela is at a crossroads in history. Should he win the Oct. 7 vote, presidential challenger Henrique Capriles Radonski would be constrained greatly by the policies and systems left by President Hugo Chavez's administration. But a change in leadership could transform Venezuela and its regional role, possibly to the extent that Cuba could seek reconciliation with the United States.

Analysis

The run-up to the election has been tumultuous. A little more than a year ago, Chavez was diagnosed with cancer, for which he received several surgeries. The past year has been rife with rumors of his impending death and although questions about his health remain, Chavez insists he is strong enough to stand for another six-year term amid collapsing infrastructure and increasing unrest.

Though it is not accurate to say that governance in Venezuela is synonymous with "Chavismo" -- Chavez's political ideology -- the Venezuelan president has decisively changed the nature of Venezuelan politics. Chavez is deeply influential in every aspect of government. Moreover, he has set a precedent that will force future Venezuelan politicians to prioritize populism and income redistribution.

When Chavez came to power in 1999, it was in the wake of more than a decade of profound public dissatisfaction with a shaky economy amid regional economic instability. Despite decades of exorbitant oil profits flowing into Venezuela, the management of that wealth by two main parties who took turns in power -- the Democratic Action Party and the Christian Democratic Party -- left millions of Venezuelans in poverty and created stark socioeconomic divisions.

Chavez's populist policies were predictable. Venezuela's political and economic elite maintained power by controlling oil resources and the government. Chavez came to power by promising to address the country's poverty and to use the government to give Venezuelans a share of the country's oil wealth. With enormous popular support, Chavez uprooted the elite and established his own inner circle. In 2002, when a coup attempt supported by the managerial staff of Petroleos de Venezuela attempted to unseat Chavez, the president cut the national oil company's staff and took control of the country and its many resources. In doing so, Chavez crippled Petroleos de Venezuela's production capacity. By breaking the national oil company, Chavez also broke the country's elite -- the kind of populist policy that was a natural evolution of Venezuelan politics.

Since then, his management style -- ad hoc consolidation of the economy -- has led to rising inefficiencies across numerous sectors. The electricity sector that was aged when he came to office is now falling apart. Transportation infrastructure is literally collapsing, and prisons are overcrowded with heavily armed gangs, many of whose members have been incarcerated for years without ever being tried.

These problems would face Capriles just as they have faced Chavez. Capriles will be able to make some changes, but he will encounter profound difficulties. Open questions remain about the loyalties of the military, which is deeply involved in the drug trade. Moreover, Capriles will not be able to drastically reduce social spending without facing significant social unrest, which means that large portions of the central government and Petroleos de Venezuela budgets will be locked in place, reducing fiscal flexibility. His main policy and key hope will be attracting foreign investment to increase oil production and national revenues.

Venezuela's International Reputation

During Chavez's presidency, Venezuela's external influence has expanded greatly, and international relations have become more important to the administration. Because of suspicions that the United States was at least peripherally involved in the 2002 coup attempt, that event was for Chavez what the failed Bay of Pigs invasion was for Cuban leader Fidel Castro: a trigger for a strategic repositioning away from the United States. But where Castro was able to form an alliance with the Soviet Union, Chavez has spent the past decade building a foreign policy around establishing piecemeal relationships with countries whose relationships with the United States are strained. Without a clear global power to serve as a political ally, Chavez has established himself as a symbol of international resistance to U.S. global domination.

Nevertheless, Venezuela's independence has largely remained in the realm of symbolism and rhetoric. The United States is still far and away Venezuela's largest trading partner. Efforts to diversify away from the United States as an oil export market have resulted in a complex trade and financing relationship with China that has almost certainly required Venezuela to accept a lower market price for its oil -- a likely factor in domestic cash flow problems.

However, in its immediate region, Venezuela has found opportunities for partnership and some influence with many governments with similar aims. Countries like Ecuador and Nicaragua, whose leaders have pursued strategies largely independent of U.S. influence, have benefited from Venezuela's oil expertise and oil exports. Argentina, though largely focused on its own domestic challenges, has found Venezuela to be a willing and convenient trade partner (Argentina has an advantage in food production, which has declined in Venezuela). For these countries, a change in leadership in Venezuela may mean cooler relations, but a change in Venezuela's policy toward these countries will have a relatively limited impact.

Two Countries to Watch

VIDEO: Evolving U.S.-Colombian Relations (Dispatch).The two most important relationships for Venezuela are with Colombia and Cuba. Venezuela and Colombia are strategic rivals and will remain so regardless of who holds power in Caracas. Nevertheless, a Venezuelan government that is more open to U.S. influence could benefit Colombia, whose fight against international drug trafficking groups is critical for economic development prospects. Venezuela's lack of domestic enforcement hinders Colombia's efforts, so a shift in Caracas' domestic law enforcement priorities could help Bogota, which is betting on peace negotiations with the Revolutionary Armed Forces of Colombia to stabilize the volatile security environment and allow sustained economic growth in Colombia.

Cuba's relationship with Venezuela has been a key element of both Venezuela's role in the region and the geopolitical tensions in the Caribbean Basin. Venezuela's deliveries of around 100,000 barrels per day of petroleum products to Cuba are a lifeline for the island nation. Outside of tourism, Cuba's development prospects without significant reforms historically have been limited, and after the social and economic chaos of the 1990s that resulted from the collapse of the Soviet Union, Cuba turned to Venezuela to keep the island's economy afloat.

A change in government in Caracas would not necessarily mean an immediate abrogation of that relationship. However, Capriles has made it clear that he will reconsider the relationship. Even if Chavez is re-elected, Cuba is vulnerable to any challenges to Venezuela's economic stability. With this in mind, Cuban planners have been slowly implementing reforms to the domestic economy.

The big question is when Cuba will reconcile its relationship with the United States. If Capriles is elected, Caracas may accelerate these considerations, removing the guarantee of Venezuelan subsidies, pushing Havana to make the concessions necessary for the United States to lift the embargo and speeding up economic reforms. Depending on the results of the U.S. elections, political dynamics in Washington could evolve enough to make this move in tandem with Cuba..

Moreover, he has set a precedent that will force future Venezuelan politicians to prioritize populism and income redistribution.

Not really. Populism has been the centerpiece of all governments since 1958. What has changed is that Chavez is more anti business than his predecessors. It has been a see-saw.

Rómulo Betancourt, the first democratic president, unlike Chávez, was a real communist, but a pragmatic politician. When he started out he put an end to the so called "white elephants" -- grandiose public projects by General Marcos Pérez Jiménez. He soon realized that oil is what brings in foreign exchange but being capital intensive it employs few people. Construction, on the other hand, is labor intensive. Being pragmatic, Betancourt soon started up new public infrastructure projects. It took Chavismo almost a decade to start working seriously on infrastructure projects.

With successive governments the labor laws were made ever more labor friendly until production faltered badly. Then the governments reversed gears. Same with price controls, CAP instituted them during his first government and eliminated them in his second. Raising the price of gas at the pump cost him his job.

I've said it before and I say it again, Venezuela has never had a right of center government since 1958 nor is it likely to have one in the visible future, not until the private productive capacity matches the fossil fuel wealth, an unlikely scenario considering that Venezuela has one of the largest oil deposits in the world for a relatively small population.

To get a better understanding of Venezuela, Stratfor should read Los Amos de Valley (The Owners of the Valley, the valley being where Caracas is located), a humorous novel based on history. Venezuela has always had an "elite" but one that changes over time. The original elite was composed of conquistadors. Over time old members disappeared and new ones rose. The new ones came from distant places, the USA, Germany, the Canary Islands, Lebanon, Bohemia. Venezuela is as much a melting pot as the USA. What has happened now is that Chavistas have displaced some of the incumbent Owners of the Valley.

There is no revolution in Venezuela, no matter how loudly Chávez claims one. All that has happened is a "coup d'etat" or as we like to say: "quítate tu pa' ponerme yo" (let me have your place). Chávez is just a question of time. He is charismatic any wily. But he is as mortal as the rest of us.

We decided on the third group, but, ¿Who to attack first? We figured we should go after the most prominent business groups because, if we succeeded with them, it would be easy to sell to smaller groups. The next question was ¿Who are they?

The answer was provided by a notable communist professor of the Universidad Central de Venezuela (our main communist hatchery, like UC Berkeley?), Doming Alberto Rangel. His 1971 book "la oligarquía del dinero" (The Oligarchy of Money), mapped the then current Owners of the Valley: